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Stock Smart Weekly (May 23, 2014)

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   AKD Research research@akdsecurities.net 009221 111 253 111 Weekly Review Following   SBP’s   status   quo   in   MPS   the   KSE ‐ 100   Index   remained   subdued   and   concluded   the   week   at   28,756   points   (down   by   0.44%WoW).   Though   average   daily   volumes   grew   by   12.6%WoW   to   149.6mn   shares,   average   traded   value   for   the   week   came   o ff by   3%WoW   to   US$73.6mn.   We   cite   lack   of    posi  ve   triggers   as   prime   culprit   behind   low   investor   par  cipa  on   as   depicted   by   declining   average   traded   value   for   the   week.   Similarly,   foreigners   also   remained   at   bay   during   the   week   as   net   in fl ows   of     just   US$6.6mn   were   realized   against   US$20.6mn   received   in   the   previous   week.   During   the   week,   the   Finance   Minister   gave   an   insight   on   the   upcoming   budget,   which   will   have   total   outlay   of    PkR3.86tn   (US$39.4bn),   tax   collec  on   target   of    PkR2.80tn   (US$28.5bn),   fi scal   de fi ‐ cit   at   4.4%   of    GDP   and   PSDP   expenditure   at   PkR525bn   (US$5.4bn).   Key   news   fl ow   during   the   week   included:   1)   9MFY14   LSM   pos  ng   growth   of    4.34%YoY   against   3.8%YoY   in   the   same   period   last   year,   2)   Gov’t   receiving   US$964mn   (about   80%   of    total   3G/4G   auc  on)   from   mobile   telecom   operators,   3)   Fx   reserves   increasing   to   US$13.1bn   (import   cover   of    3.8   months),   4)   GoP   borrow ‐ ing   over   PkR245bn   through   PIB   auc  on   against   the   target   of    PkR100bn   and   5)   Pakistan   military   going   on   the   o ff  ensive   against   TTP   and   staging   airstrikes.   Major   gainers   during   the   week   under   review   included:   AGTL   (+12.0%WoW),   INDU   (+11.2%WoW),   HCAR   (+8.4%WoW)   and   KEL   (+6.3%WoW)   while   EFOODS   ( ‐ 6.3%WoW),   NCL   ( ‐ 5.8%WoW)   and   NML   ( ‐ 4.9%WoW)   remained   laggards.   The   top   fi ve   volume   leaders   during   the   week   included   KEL   (136.11mn   shares),   LPCL   (71.81mn   shares),   HASCOL   (27.14mn   shares),   BYCO   (25.19mn   shares)   and   BOP   (24.33mn   shares).   Stock Smart    AKD Equity Research / Pakistan Pakistan Weekly Update Important disclosures including investment banking relationships and analyst certification at end of this report. AKD Securities does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. Important disclosures Copyright©2014 AKD Securities Limited. All rights reserved. The information provided on this document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject AKD Securities or its affiliates to any registration requirement within such jurisdiction or country. Neither the information, nor any opinion contained in this document constitutes a solicitation or offer by AKD Securities or its affiliates to buy or sell any securities or provide any investment advice or service. AKD Securities does not warrant the accuracy of the information provided herein. www.akdsecurities.net  AKD SECURITIES Member: Karachi Stock Exchange Find AKD research on Bloomberg (AKDS<GO>), firstcall.com and Reuters Knowledge Any   breakthrough   in   negotiations   with   the   TTP   will   bode   well   for   the   market   which   will   further   bolster   the   case   for   re ‐ rating   going   forward.   However,   as   FY15   budget   draws   closer   we   believe   market   will   continue   to   remain   lackluster.   Furthermore,   with   coming   week   being   the   rollover   week   and   open   posi ‐ tion   worth   PkR5.03bn   (as   of    May   22’14)   in   futures   counter,   we   see   market   coming   under   slight   strain   and   advise   investors   to   adopt   cautious   approach   going   into   the   final   week   of    May’14.   Outlook 23 May 2014 Top-5 Volume LeadersSymbolVolume (mn) KEL :136.11 LPCL :73.81 HASCOL :27.14 BYCO :25.19 BOP :24.33  IndicesKSE-100KSE-30 This week28,756.0019,688.35Last week28,883.3319,882.75Change-0.44%-0.98% IndicesKMI-30Allshare This week45,598.7521,324.42Last week45,920.1021,548.40Change-0.70%-1.04% Mkt Cap.PkRbnUS$bn This week6,839.92 69.20 Last week6,912.57 70.16 Change-1.05%-1.37%  Avg. Daily Turnover ('mn shares) This week149.62 Last week132.93 Change12.55% 18,00019,50021,00022,50024,00025,50027,00028,50030,0000100200300400500600700       M    a    y   -      1      3      J    u      l   -      1      3      S    e    p   -      1      3      O    c     t   -      1      3      D    e    c   -      1      3      F    e      b   -      1      4      A    p    r   -      1      4      M    a    y   -      1      4 (Index)(mn) Volume (LHS) KSE-100 Index Index & Volume Chart Source: KSE & AKD Research Universe Gainers & Losers ‐ 8.0% ‐ 6.0% ‐ 4.0% ‐ 2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%      A     G     T     L     I     N     D     U     H     C     A     R     K     E     L     A     K     B     L     E     F     E     R     T     F     A     T     I     M     A     N     M     L     N     C     L     E     F     O     O     D     S 28,951   28,843   28,760   28,742   28,756   28,600   28,650   28,700   28,750   28,800   28,850   28,900   28,950   29,000  ‐  50,000   100,000   150,000   200,000   250,000      1     9        ‐      M    a    y     2     0        ‐      M    a    y     2     1        ‐      M    a    y     2     2        ‐      M    a    y     2     3        ‐      M    a    y (Index)(Shrs'000) Ready   Volume   (LHS) KSE100   Index   (RHS)  AKD Securities Limited 23 May 2014 StockSmart Pakistan Weekly Update This Week’s Daily Reports 2 May 09, 2014 May 08, 2014 May 07, 2014 Pakistan Tex    les: Higher value add plays preferred, (AKD Daily, May 23, 2014) According   to   the   recent   PBS   data,   tex  le   exports   for   Apr’14   came   o ff by   15%   on   a   se ‐ quen  al   basis   to   clock   in   at   US$1,054mn.   As   a   result,   10MFY14   tex  le   exports   came   in   at   US$11.44bn   vs.   tex  le   exports   of    US$10.74bn   during   the   same   period   last   year,   transla  ng   into   6.5%YoY   growth.   In   this   regard,   outperforming   tex  le   segments   during   the   year   so   far   have   been   Co  on   Cloth,   Knitwear,   Bedware   and   Readymade   Garments.   While   the   recent   sharp   apprecia  on   of    PkR   vs.   the   US$   has   hurt   pro fi tability   of    the   tex ‐ le   sector   (as   revenues   came   o ff but   costs   remained   fi xed),   we   believe   share   prices   already   re fl ect   a   stronger   PkR.   Within   this   backdrop,   we   do   not   see   the   PkR   strengthen ‐ ing   further   over   the   course   of    1HFY15   which   should   prove   to   be   incrementally   posi  ve   as   raw   material   inventories   adjust   to   track   the   new   PkR/US$   parity.   We   con  nue   to   favor   tex  le   plays   without   or   rela  vely   low   concentra  on   in   the   yarn   segment   par  cu ‐ larly   NML   (target   price:   PkR137.5/share).   BAFL: Uncertainty caps upside, (AKD Daily, May 22, 2014) Following   BAFL’s   con   call   yesterday,   we   tweak   our   EPS   es  mates   by   3%   on   average   but   leave   our   target   price   unchanged   at   PkR32/share.   While   1QCY14   results   were   broadly   inline   with   expecta  ons   and   BAFL   has   also   shi  ed   investments   towards   PIBs,   stock   price   performance   has   remained   subdued   with   limited   gains   of    1.7%CYTD.   We   a  ribute   this   weak   price   performance   to   1)   slowdown   in   the   Islamic   banking   business   and   2)   rela  vely   li  le   capital   cushion   which   has   necessitated   an   approach   to   IFC   for   a   possible   equity   stake.   Although   we   take   capital   for   the   sake   of    funding   BS   growth   as   a   long ‐ term   posi  ve,   a   poten  al   rights   issue   going   forward   may   suppress   immediate ‐ term   sen ‐ ment   in   the   stock.   That   said,   BAFL   trades   at   a   CY15F   P/B   of    1.0x   and   P/E   of    6.1x   where   we   believe   a   39%   discount   to   private   sector   peers   more   than   compensates   for   afore ‐ men  oned   risks.   Our   TP   of    PkR32/share   o ff  ers   16%   upside   where   we   would   recom ‐ mend   taking   posi  ons   on   dips.   HBL: Well placed to play economic rebound, (AKD Daily, May 21, 2014) HBL   has   gained   22%CYTD   to   trade   at   a   CY15F   P/B   of    1.58x,   P/E   of    9.4x   and   D/Y   of    5.4%.   We   believe   this   valua  on   set   is   rela  vely   un ‐ stretched   where   a   more   palatable   oper ‐ a  ng   environment   for   banks   (within   the   backdrop   of    a   rebounding   economy)   can   po ‐ ten  ally   lead   HBL   to   post   further   gains.   A  er   fl a  sh   earnings   across   CY11 ‐ CY13,   we   believe   HBL   is   in   posi  on   to   post   15%YoY   growth   in   CY14F   with   impetus   provided   from   the   shi  into   PIBs   from   T ‐ bills.   This   should   lay   the   pla   orm   for   double ‐ digit   growth   across   the   medium ‐ term,   with   prospects   for   posi  ve   earnings   surprises   if    credit   costs   remain   in   control   (NPL   stock   reduced   by   19%YoY   in   1QCY14)   and   focus   remains   on   non   funded   income.   Our   revised   target   price   of    PkR200/share   (rolled   over   to   CY15F)   for   o ff  ers   a   1yr   total   return   of    13.5%   while   there   is   room   for   further   upside   over   the   medi ‐ um ‐ term   should   the   GoP   divest   part   of    its   41.5%   stake   in   the   bank,   thereby   resul  ng   in   increased   liquidity   in   the   stock.   PSMC: Wagon ‘R’evving up!, (AKD Daily, May 20, 2014) Following   the   launch   of    the   new   Wagon   R   (1000cc   hatchback)   along   with   swi  PkR   ap ‐ precia  on   and   subsequent   incorpora  on   of    higher   GMs,   we   raise   our   EPS   es  mates   for   PSMC   by   21%   on   average.   Together   with   rollover   onto   Jun’15,   this   results   in   a   revised   target   price   of    PkR230/share   for   PSMC   which   o ff  ers   upside   of    14%   from   current   levels.   Our   Accumulate   stance   is   based   on   a   projected   5yr   NPAT   CAGR   of    11%,   driven   by   sus ‐ tained   strong   margins   (7%+)   and   an   improved   outlook   for   sales   despite   regulatory   risks.   In   this   regard,   we   have   reduced   our   volumetric   assump  ons   for   local   lower   segment   vehicles   by   5%   on   average   vs.   base ‐ case   in   view   of    the   likely   reduced   tari ff  s   on   import ‐  28,700 28,720 28,740 28,760 28,780 28,800 28,820 28,840 28,860      9    :     0     7     9    :     5     1     1     0    :     3     5     1     1    :     1     8     1     2    :     0     2     1     2    :     4     4     1     3    :     2     7     1     4    :     1     0     1     4    :     5     3     1     5    :     3     7     1     6    :     2     1 Source:   KSE   &   AKD   Research   28,700 28,750 28,800 28,850 28,900      9    :     2     4     1     0    :     1     5     1     1    :     0     5     1     1    :     5     6     1     2    :     4     6     1     3    :     3     6     1     4    :     2     7     1     5    :     1     7  28,720 28,770 28,820 28,870 28,920 28,970      9    :     2     5     1     0    :     0     6     1     0    :     4     6     1     1    :     2     6     1     2    :     0     5     1     2    :     4     5     1     3    :     2     5     1     4    :     0     4     1     4    :     4     3     1     5    :     2     4 May 06, 2014 28,780 28,830 28,880 28,930 28,980 29,030      9    :     2     4     1     0    :     1     0     1     0    :     5     4     1     1    :     3     9     1     2    :     2     5     1     3    :     1     0     1     3    :     5     4     1     4    :     3     9     1     5    :     2     4 May 05, 2014 28,50028,56028,62028,68028,74028,80028,86028,920      9    :     3     0     1     0    :     2     2     1     1    :     1     4     1     2    :     0     5     1     2    :     5     6     1     3    :     4     7     1     4    :     3     8     1     5    :     3     0  AKD Securities Limited 23 May 2014 StockSmart Pakistan Weekly Update This Week’s Daily Reports 3 ed   vehicles   of    lower   segment   (below   700cc).   That   said,   we   believe   such   risks   are   al ‐ ready   priced   in.   PSMC   trades   at   a   CY14F   P/E   of    6.8x   where   we   have   an   Accumulate   stance   on   the   scrip.   SBP adopts wait and see approach, (AKD Daily, May 19, 2014) Despite   some   expecta  ons   of    a   rate   cut   in   the   May'14   MPS,   the   SBP   has   taken   the   cau ‐ ous   approach   for   now   in   keeping   the   DR   unchanged   at   10%.   In   this   regard,   the   central   bank   has   cited   vola  le   in fl a  on   (9.2%YoY   in   Apr'14)   as   a   key   risk.   At   the   same   me,   while   the   economy   appears   to   be   on   an   up  ck,   the   SBP   wishes   to   see   this   trend   take   root.   This   is   con  ngent   upon   1)   mely   materializa  on   of    further   foreign   in fl ows   from   mul  lateral   and   bilateral   donors   (currently   fx   reserves:   US$12bn;   import   cover:   3.6   months),   2)   reduc  on   in   fi scal   borrowing   and   3)   stability   in   the   exchange   rate   (PKR   has   appreciated   by   6.8%CYTD   vs.   the   US$)   and   its   impact   on   trade   numbers.   Provided   this   is   achieved   and   in fl a  on   remains   in   check,   we   believe   the   SBP   may   have   room   to   cut   the   DR   by   at   least   50bps   in   the   next   MPS   par  cularly   as   in fl a  on   expecta  ons   remain   low,   aggregate   demand   is   moderate   and   FY15   CPI   is   expected   to   average   ~8%YoY.   While   the   market   could   remain   choppy   un  l   Budget   announcement,   we   remain   con fi dent   that   the   rate   hike   cycle   is   over.   Within   this   backdrop,   we   retain   faith   with   our   cylicals   theme   were   our   preferred   plays   include   UBL,   PTC,   ENGRO,   LUCK   and   OGDC.    AKD Securities Limited 23 May 2014 StockSmart Pakistan Weekly Update 4 Commodities   International Major Currencies  Source: Bloomberg Source: Bloomberg Major World Indices’ Performance  Source: Bloomberg TRJ-CRB Index Source: Bloomberg PkR/US$ Trend Source: Bloomberg Regional Valuations (2014) Source: Bloomberg & AKD Universe 270275280285290295300305310315      M    a    y   -     1     3     A    u    g   -     1     3     O    c     t   -     1     3     D    e    c   -     1     3     M    a    r   -     1     4     M    a    y   -     1     4  97.0 99.0 101.0 103.0 105.0 107.0 109.0      M    a    y   -     1     3     J    u     l   -     1     3     S    e    p   -     1     3     O    c     t   -     1     3     D    e    c   -     1     3     F    e     b   -     1     4     M    a    r   -     1     4     M    a    y   -     1     4 SPOT   Units   23 ‐ May ‐ 14 16 ‐ May ‐ 14 WoW CYTD TRJ ‐ CRB Points 308.16 305.92 0.73% 9.99%Nymex   (WTI) US$/bbl. 104.03 102.02 1.97% 5.70%ICE   Brent   US$/bbl. 111.86 110.27 1.44% 0.94%N.   Gas   Henry   Hub US$/Mmbtu 4.49 4.46 0.67% 3.36%Cotton   USd/Pound 92.35 92.55  ‐ 0.22% 2.95%Gold   US$/Tr.Oz 1291.55 1293.46  ‐ 0.15% 7.12%Sliver   US$/Tr.Oz 19.398 19.371 0.14%  ‐ 0.36%Copper   US$/MT 6959 6923.5 0.51%  ‐ 5.65%Platinum   US$/Oz 1478.25 1466.13 0.83% 7.94%Coal   US$/MT 73.9 73.9 0.00%  ‐ 12.65% SPOT   23 ‐ May ‐ 14 16 ‐ May ‐ 14 Chg   +/ ‐ WoW CYTD Dollar   Index   80.382   80.043   0.339 0.42% 0.43%USD/PkR   98.858   98.537   0.320 0.32%  ‐ 6.14%USD/JPY   101.920   101.500   0.420 0.41%  ‐ 3.22%EUR/USD   1.363   1.369  ‐ 0.006  ‐ 0.46%  ‐ 0.81%GBP/USD   1.684   1.681   0.003 0.18% 1.72%AUD/USD   0.922   0.936  ‐ 0.014  ‐ 1.49% 3.41%NZD/USD   0.854   0.863  ‐ 0.009  ‐ 0.99% 3.99%CHF/USD   0.896   0.893   0.003 0.34% 0.31%CAD/USD   1.090   1.086   0.004 0.37% 2.62%USD/KRW   1,025   1,024   0.590 0.06%  ‐ 2.39%CNY/USD   6.236   6.233   0.003 0.04% 3.00% Country Bloomberg   Code 23 ‐ May ‐ 14 16 ‐ May ‐ 14 WoW CYTD Pakistan   KSE100   Index 28,756   28,883  ‐ 0.44% 13.83%Srilanka CSEALL   Index 6,280   6,315  ‐ 0.55% 6.22%Thailand   SET   Index 1,397   1,405  ‐ 0.60% 7.56%Jakarta   JCI   Index 4,973   5,032  ‐ 1.16% 16.35%Malaysia   FBMKLCI   Index 1,869   1,883  ‐ 0.75% 0.12%Philippines PCOMP   Index 6,811   6,818  ‐ 0.09% 15.65%Vietnam VNINDEX   Index 541   529   2.27% 7.30%Hong   Kong   HSI   Index 22,966   22,713   1.11%  ‐ 1.46%Singapore   FSSTI   Index 3,278   3,263   0.47% 3.49%Brazil IBX   Index 21,780   22,236  ‐ 2.05% 2.28%Russia   RTSSTD   Index 9,671   9,393   2.96%  ‐ 4.97%India   SENSEX   Index 24,693   24,122   2.37% 16.64%China   SHCOMP   Index 2,035   2,027   0.40%  ‐ 3.85%S&P SPX   Index 1,892   1,878   0.78% 2.39%DJIA INDU   Index 16,543   16,491   0.31%  ‐ 0.20%NASDAQ    Composite   CCMP   Index 4,154   4,091   1.56%  ‐ 0.53%UK UKX   Index 6,811   6,856  ‐ 0.65% 0.92%German   DAX   Index 9,745   9,629   1.20% 2.01%Qatar   DSM   Index 13,008   13,105  ‐ 0.74% 25.32%Abu   Dhabi ADSMI   Index 4,926   5,021  ‐ 1.91% 14.81%Dubai   DFMGI   Index 4,864   5,181  ‐ 6.12% 44.34%Kuwait   KWSEIDX   Index 7,347   7,404  ‐ 0.77%  ‐ 2.68%Oman   MSM30   Index 6,744   6,735   0.14%  ‐ 1.32%Saudi   Arabia   SASEIDX   Index 9,751   9,807  ‐ 0.58% 14.24%MSCI   EM MXEF   Index 1,041   1,032   0.90% 3.84%MSCI   FM MXFM   Index 660   669  ‐ 1.23% 11.08% EPS   Growth   PE(x) Pakistan   26% 8.85   Indonesia 15% 11.92   Malaysia   18% 13.44   Philippines 9% 15.16   Vitenam 15% 16.43   India 15% 13.54   China 13% 7.05   % ROE Divd   Yld Pakistan   21.42   5.30   Indonesia 18.55   2.22   Malaysia   13.37   3.29   Philippines 14.69   2.31   Vitenam 15.70   2.94   India 16.34   1.85   China 14.23   4.01  
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